Banker Pay Still Killing Shareholders (Update 1)

Lazard is postponing bonuses, but it isn't the same as cutting them. And that has big implications for the global banks.

Updated with additional details on second page from Wednesday's presentation by Goldman Sachs. NEW YORK ( TheStreet) --Think moves made by the big banks in slashing Wall Street pay has made any difference? Take a look at fourth quarter earnings from Lazard ( LAZ).

The investment bank's inability to rein in compensation may be a sign of trouble ahead for larger rivals like Goldman Sachs ( GS) and Morgan Stanley ( MS) that have been credited with showing discipline on pay.

At Lazard, compensation was the main drag on the company's fourth-quarter earnings, which missed analysts' estimates by a wide margin. While analysts had been looking for a profit of 37 cents per share, Lazard earned just a penny at best, or lost 4 cents "depending on how one counts it," as Oppenheimer analyst Chris Kotowski put it in a research note.

Kotowski, who had been looking for an above-consensus profit of 45 cents per share, described Lazard's results as "perhaps the most disappointing earnings report that we have seen in the past three years."

Bank of America Merrill Lynch analyst Guy Moszkowski also chimed in with a note on Monday, writing that "investors have clearly been frustrated over time with the company's inability to bring its reported comp/ revenue ratio to, or below, the targeted average 57.5% for all but brief, peak-y periods."

Lazard Chairman and CEO Ken Jacobs addressed the issue at length on a call with analysts Monday.

"We are committed to growing awarded compensation at a slower rate than revenue growth. We accomplished this in 2009 and 2010," he said.

Investors weren't satisfied. They drove Lazard shares down 6.6% this week through Tuesday, even as financial stocks rallied as a group.

A company spokeswoman did not return a call seeking comment.

Rochdale Securities analyst Richard Bove said Lazard's problem is compensation deferred from previous years, much of it awarded under Jacobs' predecessor Bruce Wasserstein, who died in 2009.

"Wasserstein was in this battle to take over control of Lazard. He put out a lot of deferred compensation to a bunch of people," Bove says. Indeed, payments to the Wasserstein estate have eaten up a big chunk of Lazard's earnings, according to Bove and published reports.

"They're sucking in the cost of these deferred compensation plans. They got hit really hard in 2011 and they're going to get hit really hard again in 2012, which means that while the goal is to get the thing under 50%, that's not likely to occur until 2013," Bove says.

Bove argues Lazard chief Jacobs "is doing everything possible to get control of his compensation system but in my view he's just stuck. He's stuck with all the stuff that Wasserstein left him."